Goldman, Morgan Stanley, to also settle on foreclosures: sources

The exterior of the world headquarters for Morgan Stanley & Co. Incorporated is seen in New York, May 19, 2008.

Reuters/Lucas Jackson

Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) are among a group of banks expected to agree as soon as this week to a $1.5 billion settlement with federal regulators over botched foreclosure claims, two sources familiar with the matter said on Tuesday.

HSBC Holdings Inc (HSBA.L), Ally Financial Inc GKM.N, EverBank Financial Corp (EVER.N) and OneWest Bank FSB have also said they are in settlement discussions with the Federal Reserve and the Office of the Comptroller of the Currency.

It is not clear how many of these banks are part of the $1.5 billion settlement that includes Goldman Sachs, Morgan Stanley and other relatively small mortgage servicers.

The two sources did not want to be identified because they were not authorized to speak publicly about the settlement.

A spokeswoman for the Federal Reserve reiterated a previous statement that the Fed and the OCC continue to work with other parties outside of Monday's accord to reach similar agreements. Representatives of the OCC did not immediately respond to a request for comment.

Goldman and Morgan Stanley's respective roles in the settlement stems from mortgage-servicing businesses that the two investment banks purchased in the run-up to the subprime mortgage crisis, and have since sold. Goldman had owned Litton Loan Servicing LP and Morgan Stanley owned Saxon Capital Inc.

The Federal Reserve had ordered the two firms to conduct case-by-case reviews of foreclosures after widespread mistakes were discovered across the industry in the way U.S. banks had processed home seizures. The settlement would end those reviews and result in at least $1.5 billion in cash and assistance for borrowers.

(The story corrects to show Goldman, Morgan Stanley are part of a group that may agree to settlement)